News roundup: AUM for RIAs on the rise, new planner compensation, and lump-sum payouts gain appeal

Schwab’s most recent RIA Benchmarking Study finds that RIA revenues are on the rise, defying threats from robo-advisors and other industry challenges, reports ThinkAdvisor. The median AUM for RIAs with $250 million or more in assets grew from $358 million in 2012 to $593 million in 2016, the study shows. See the full story below. Also, a damaged reputation online can not only result in a loss in potential customers, but be costly and time-consuming to repair, according to an article at InvestmentNews. The article discusses how firms can clean up their online image and points to circumstances that can lead to a negative link. For example: Negative reviews of service posted by unhappy clients, or complaints filed on Ripoff Report. See the details below.

How RIAs Are Growing Assets as More Clients Withdraw Them

By Bernice Napach

Source: ThinkAdvisor

Despite challenges from the proliferation of robo-advisors and passive investment vehicles, the RIA business is growing at a fairly brisk pace. According to Schwab’s latest RIA Benchmarking Study, the median AUM for RIAs with $250 million or more in assets grew at a 10% compounded annual rate from 2012 through 2016, to $593 million from $358 million.

Few prospects walk into a financial adviser’s office without doing an online background check first, so firms need to have a game plan for tracking and reacting to negative internet posts about the business or its advisers. Even someone who has been referred by a satisfied client can be turned off by a story reporting a disciplinary allegation, a sour review on WalletHub or Yelp, or even a blog from a disgruntled ex-employee, especially if the undesirable post lands on the first page of search results.

Determining what to pay a new advisor or planner can present a challenge for many firms. In a post at New Planner Recruiting, Caleb Brown discusses factors to keep in mind when deciding on compensation and provides information on offers made to recently hired advisors, including new college grads and experienced candidates. See a link to his post below. Also, the CFP Board and Harvest Exchange, which distributes materials written by asset managers, are offering CFP-credentialed advisors an opportunity to obtain CE credits, reports Financial Advisor. More than 40,000 advisors use Harvest Exchange to read analysis and information, and the partnership allows advisors to earn credit for doing this, the article notes.

Compensating New Planners

By Caleb Brown

Source: New Planner Recruiting

One of the questions we field on a regular basis is how much should I pay my new hire. In last month’s article, we looked at some pitfalls associated with firms relying on industry salary surveys as a panacea. Below we have provided compensation information on some of our recent placements to hopefully provide additional data points for you to consider when making offers to new hires and/or revisiting compensation with your current team.

CFP-credentialed advisors now have a new way to obtain CE credits thanks to a partnership between the CFP Board and Harvest Exchange, a distributor of the latest insights from asset managers. Under the partnership, advisors using the Harvest Exchange—an online platform that facilitates the free exchange of articles written by asset managers—may also qualify for continuing education credits by completing a Harvest CFP course.

Now that the Federal Reserve has been gradually increasing interest rates, some advisors suggest that clients with pensions should consider a lump-sum payout “sooner rather than later,” according to InvestmentNews. “Simple math suggests that the size of the lump-sum payout offers will decline as interest rates continue to rise,” the article states. See the full story below. Also, Natalie Choate of Morningstar describes several situations in which retiring clients can get caught in a Catch 22 situation. One such situation involves a person who wants to retire early (age 56) and receive penalty-free distributions from his 401(k) plan until age 59 1/2, but the plan administrator tells him he can only take a lump-sum distribution. Read the full details below.

Rising rates increase the appeal of lump-sum pension payouts

By Jeff Benjamin

Source: InvestmentNews

As the Federal Reserve continues its pattern of gradually raising interest rates off historic low levels, financial advisers will want to start recalculating the way they advise clients when it comes to pension payout options. There are always multiple variables to consider, but when rates are rising, some advisers believe the simple math favors taking a lump-sum payout instead of locking in for a few decades of monthly pension payments.

Sometimes you need a particular form of distribution to achieve a certain tax result, but the retirement plan doesn’t allow it. Or sometimes the tax law seems to say opposite things about the same distribution. Here are a few such Catch 22 situations when it comes to retirement plans.